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Property appraisal in high-rises: A cooperative game theory approach

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  • Ben-Shahar, Danny
  • Deng, Yongheng
  • Sulganik, Eyal

Abstract

The construction of the higher stories in a building is utterly contingent upon the construction of the lower ones, while the construction of lower stories does not require the construction of the higher ones. This rationale underlies our adoption of a cooperative game theory methodology for examining the value of units based on the cost approach of land appraisal. Particularly, we propose the Shapley value solution to examine the allocation of the land and construction cost among the stories of the building. We explore the allocation mechanism and derive several closed-form properties by which the value pattern of stories in a building is rationalized. The proposed cost allocation may, among other things, generate values when comparable market prices are unobservable (consistent with the cost approach); may be used by courts in order to compute compensations in cases of disputes regarding expansions and redevelopments of existing structures among co-owners; and may determine the rent cost allocation in an organization with several profit centers located on different floors of a building.

Suggested Citation

  • Ben-Shahar, Danny & Deng, Yongheng & Sulganik, Eyal, 2009. "Property appraisal in high-rises: A cooperative game theory approach," Journal of Housing Economics, Elsevier, vol. 18(1), pages 25-33, March.
    • Handle: RePEc:eee:jhouse:v:18:y:2009:i:1:p:25-33
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    References listed on IDEAS

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    Cited by:

    1. Ben-Shahar Danny & Sulganik Eyal, 2009. "Fair Depreciation: A Shapley Value Approach," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-18, April.

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    More about this item

    Keywords

    R31 R32 D63 Shapley value High-rises Cost allocation Story Appraisal;

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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